My First Economics Midterm

Lat Friday I took my first economics midterm - the first midterm I have ever taken in college.

Here is the basic rundown of my schedule. I studied for the test that week. On Thursday we had the TA review session and I did not leave early and was one of twenty kids still there at the end. During this session we went over a practice test that I thought we did not have the answers to. I then went to the library until I got kicked out and then I went to bed. I took the test in an hour and then went on my fall break. I just got the results of my test yesterday.

This whole process showed several economic principles, mostly of opportunity cost. I went to the review session because I thought we didn't have the answers to the review test. I found out later in the library that we did on an audio recording and I listened to the whole thing and got all the answers. This causes me to be up later. In my opinion, I could have gotten to bed earlier had I not gone to the review session and just listened to the recording - I got the same information. The cost of going to the review session was me not studying on my own with people, me not listening to the recording until later and me going to bed late.

Now the problem with opportunity cost is that we'll never know what would have happened if I took the other option. Maybe I would have done worse on the test without the review session. Maybe I would have slept and I would have done better.

There is a point every night before a test where there is a question of opportunity cost. When does the cost of studying outweigh the cost of sleeping? The problem is, we will never know. If I chose to sleep more maybe I would do better or maybe I would do worse. If I studied more maybe I would know more, or maybe I would pass out during the test. But I will never know the outcome of taking the other choice.

Class 14 - The Cost of Hearing Copacabana Over Born To Run = My Ears!

Today we talked about the axiom of scarcity and how people make choices.

We talked about how people are forced to make tradeoffs by scarcity and how these choices show our values. We talked about equity vs efficiency. Equity is making things more equal for everyone, like taxing people that do the same work, and efficiency is defined economically as producing things that people want at a low cost.

A cost is anything that consumes resources.

We then talked about opportunity costs and an in depth discussion on an example involving Bruce Springsteen tickets. Opportunity costs are what you must give up to get things - the net value of the next best option. (Benefits - costs). In class we talked about a free Bruce ticket vs a Barry Manilow ticket that I value at $50 but I can buy for $40. If I valued Bruce for nothing, the opportunity cost of seeing Bruce is $10 (the saved $10 of seeing Barry).

However, everybody values Bruce! So what is the minimum that I have to value Bruce at to see him? Well if I valued Bruce at $11 then I am saving $11 over the $10 of Barry so I should go to Bruce. But I could also value Bruce at $1 million and then I would definitely go to Bruce. I may or may not value Bruce more (I do.) But the value of Bruce must be at least $11.